Philadelphia Is the Next Greece

When it comes to pensions, the city is basically broke. And there’s no bailout — or solution — in sight

In a recent speech, Philadelphia Mayor Michael Nutter urged college students to stay in the city after graduation, stating, “we have a more knowledge-based workforce here.”

Too bad we don’t have a “knowledge-based government.”

Nutter boosted Philadelphia by saying the budget was balanced, praising the federal stimulus bill for keeping the city solvent.

“We would be in a depression (without it). There’s no question about that,” he said.

Wrong verb, Mr. Mayor. [SIGNUP]

Since Philadelphia is already insolvent, there are only two explanations for Nutter’s incoherence:

1)    He has no idea how dire his city’s situation has become, or

2)    He absolutely knows, but will use smoke-and-mirror tactics to get re-elected next year, passing the buck to his successor four years down the line.

Here’s betting on the latter.

*****

Nutter’s 2007 election was met with great fanfare from business leaders, city residents and even suburban folks. They naively believed Nutter would usher in a new era by cutting taxes, slashing bureaucracy and playing hardball with out-of-control union leaders.

Uh…hello?

This was Michael Nutter we were talking about, after all.  As a City Councilman, he voted for bill after bill which sunk the city further into the abyss, increasing the mass exodus of companies and people — and their revenue — from the City of Brotherly Love.

As a result, the city achieved the distinction of having the highest murder, violence and poverty rates, while leading the way in school drop-outs.

As Mayor, Nutter’s track record hasn’t been more of the same.

It’s worse.

Crime is rampant (such as flash mobs wreaking havoc in Center City), the unions are getting contracts the city can’t afford, public schools are deathtraps where survival is the ONLY order of the day, the government workforce has swelled, and the city pension is bankrupt.

Yes, bankrupt.

And we’re supposed to expect college grads to actually stay here?

Nutter’s own twisted logic tells us everything we need to know — the stimulus staved off a depression.

And now that it’s gone, what’s the plan?  He’s on his own, the bailouts are over, and the rent is due.

But if he can hold off a challenger next year, life is good.

Until the Molotov cocktails start flying.

*****

Whenever a government official admits something isn’t good, the reality is always worse.

In Philadelphia’s case, the Mayor has conceded that the city pension is somewhat underfunded.

Translation: it is insolvent.  Officials state that the pension is 45 percent funded, meaning that for every dollar owed, the fund has 45 cents in its coffers.

That level is considered catastrophically low, and anyone with one eye open knows accounting gimmicks can easily inflate that number.  In reality, it’s most certainly lower.

According to last week’s Financial Times, of all American cities, Philadelphia has the most immediate cause for concern because “…current pension assets for plans sponsored by Philadelphia can only pay for promised benefits through 2015…”

So in a few short years, with not enough money coming in to pay those owed pensions, the city will be forced to send out letters that could read something like this:

“Dear Retired Police Officer,

Sorry, we didn’t exactly manage your pension very well.  Actually, we bankrupted it by paying for our pet projects and not funding it when we should have.  But hey, stuff happens!  Here’s 40 percent of what you’re owed.  We hear Wal-Mart may be hiring greeters, so good luck to you, and thanks for your service….”

Think it can’t happen?

It did in Greece, and riots shook that country for months on end, bringing the government to the edge of collapse.  Only when the European Union and International Monetary Fund stepped in did Greece somewhat stabilize, although it is still in an extremely tenuous position.

But there’s no bailout in Philadelphia’s future.

What Nutter and the political insiders don’t yet comprehend is that the rules of the traditional game are over — period. In years past, Philly always looked to the state and the feds for bailouts, and usually got them.

But this recession is different, and things will get considerably worse before they get better.  That means Business As Usual handouts won’t be coming.

Pennsylvania, facing a deficit of over $5 billion, is out of the bailout business.  And forget the U.S. government, with its $14 trillion debt; under soon-to-be Republican control, it too will be taking a pass.

Hence the riots that inevitably will sweep through the city.

While our men in Blue are honorable, don’t count on them aggressively stopping their retired brothers who received the short end of the stick, especially since current city workers –including police — will have virtually NO retirement benefits coming their way.

*****

Nutter’s answer to reverse this crisis?   Raise revenue by hiking the city portion of the state sales tax 100 percent and defer pension payments for two years.  In Year Three — conveniently after he is reelected — the Mayor will write a check for $800 million to bail out the pension.  Or so his plan goes.

The only problem is that there’s not a snowball’s chance of that happening.  None.

To recap: there will be no bailout, and the pension will implode, leading to massive unrest.

Short of the city officially declaring bankruptcy — which is much easier said than done, and would lead to a host of other problems — Philadelphia will further descend into chaos, being rightfully viewed as a Third-World city.

And to think all of it could have been avoided.

Mayor Nutter and City Council, like so many politicians, incorrectly believe that government and “government money” creates jobs and wealth, when in reality, the exact opposite is true.

Government creates nothing, nor should it.  Rather, it’s free people in a competitive environment who are the engine of a thriving democratic society.   Government should be there to serve the people, not the other way around.  Nowhere is that more apparent than in once-great cities like Philadelphia, where the economic lights are on their last flicker.

The beauty of math is that it doesn’t lie.  Two plus two will always equal four –whether one chooses to admit that or not.  Likewise, out-of-touch politicians like Michael Nutter can pretend that all is rosy in Philadelphia, promising an empty bill of goods to our children. But just because he chooses not to acknowledge the real problems doesn’t mean they’re not there.

Amazingly, many residents, especially those expecting their pensions, still haven’t caught on to his Philly Two-Step. They too, are equally at fault for not demanding more accountability of their leaders, preferring to live in a Fantasyland belief that, at the end of the day, their pension — their lifeblood — will be there, intact.

How wrong they are.

And no amount of rioting is going to change that fact.

Here’s an idea.  Wake up, and send Mayor Nutter a message next year that the pillaging of his citizens is coming to an end.  Send him packing and elect a bold leader willing to right the ship, regardless of political fallout.

Anything else is just bad math.

Chris Freind is an independent columnist, television commentator, and investigative reporter who operates his own news bureau, www.FreindlyFireZone.com. Readers of his column, “Freindly Fire,” hail from six continents, thirty countries and all fifty states. His work has been referenced in numerous publications including The Wall Street Journal, National Review Online, foreign newspapers, and in Dick Morris’ recent bestseller “Catastrophe.”

Freind also serves as a weekly guest commentator on Philadelphia-area talk radio shows, and makes numerous other television and radio appearances, most notably on FOX.  He can be reached at CF@FreindlyFireZone.com

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  • Bankrupt city

    Where’s the rest of the media been on this? It’s ’bout time someone told the truth on this matter.

    thank you chris freind. once again!

  • Philly Mary

    Yep. That about sums it up. The future of the Cradle of Liberty is not good. Ben Franklin was asked, ” What did you give us sir?”. His answer, “A Republic, if you can keep it”. Well, we couldn’t.

  • Barry Saetoro

    Such a shame that the cradles of our republic, places like Philadelphia and Massachusetts, are now at the forefront of destroying the legacy of our Founding Fathers.

  • http://paul@singerfinancial.com Paul Singer

    why not just expropriate all the Swiss and foreign bank accounts of the former and current city officials, union bosses and bag men law firms..That would be more than enough to bail us out..

  • Tom Pernis Mesa

    What idiot writes with fragments and 1-2 sentences at a time?

  • Sterling Archer

    Does anyone see a pattern here? City ruled by Democrats for decades…..Bloated unions…..Bankruptcy.

    See also: Chicago, New York, Detroit (New Mogadishu), Baltimore, LA.

    Democrats run every city into the ground. Even after the city is on fire the retarded citizens will continue to vote for corrupt and incompetent Democrats. You can’t tell me that Republicans share the blame here. They haven’t been in power since the 40s!!!

  • Phillyboy

    Chris, stay in Havertown. Write your garbage for the Delco Times. Corrupt since the Civil war.

  • Michelle

    When do taxpayers get a chance to vote on whether or not they choose to pay for every state worker to retire with a pension? I actually have to save for my retirement. Wish we could all work for the state, local or federal government! After all, that seems to be where all the perks are. Grow up people, taxpayers working hard in private enterprise should not have fund anyone else’s pensions. Period.

  • http://wwwirsgov.org/ www irs gov

    Cool web site!! Fantastic content. Thanks a ton.

  • http://HUTUPANDENJOYTHEMUSICn()n Kerrie Rosenholm

    Hey I stored it to my computer Sweet post